Loan

A loan is a variety of debt. Like all debt instruments, a loan comprises the redistribution of monetary assets over time, between the bank and the borrower. In a loan, the borrower at first receives or borrows a sum of money, called the principal, from the bank, and is obliged to repay or repay an equivalent quantity of money to the bank at a later time. Usually the cash is repaid in regular payments, or partial payments ; in an allowance, each installment is an identical quantity. The loan is in general provided at a cost, known as interest on the debt, which supplies a motivation for the bank to take part in the loan. In a legal loan, each of these needs and limitations is imposed by contract, which can also place the borrower under further limitations known as loan covenants. Though this article concentrates on financial loans, in practice any material object might be lent. Acting as a provider of loans is one of the principal jobs for fiscal institutions. For other establishments, issuing of debt contracts like bonds is a normal source of funding.

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